What are the roots and causes of the regression in real incomes for mostly lower- and middle-income Oregonians, and what federal policies would you support or repeal in order to reverse these trends? Or alternately, are the solutions outside of the federal government's reach, and if so where do they lie?As I see it, first there's the "why." Then there's the "what to do about it." The first one is easier.
As to "why," there are a couple of easy Oregon-specific answers: Oregon used to have a lot of well-paying union jobs in the timber industry. Many of them went away, due to a combination of international competition, mechanization, and, yes, to a small extent, the spotted owl. Now, that doesn't mean I'm anti-owl; cutting old growth was not a long-term strategy - eventually it's all gone, and the jobs with it. But I don't doubt that the owl speeded up the loss of timber jobs to some extent.
For awhile in the 1990's we saw Oregon incomes climbing back up, relative to the rest of the country, largely due to decent-paying high-tech jobs. Intel added 10,000 jobs in the decade. But that didn't last. Last year, Intel cut over 1,000 jobs in Oregon.
But we shouldn't focus on Oregon-specific answers alone. As David Cay Johnston recently reported in the New York Times, incomes are stagnating for regular Americans all over the country:
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows. While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
In the past couple of years, we've seen some gains - but they've been pretty small (too small to get us back to 2000 levels), and they certainly weren't evenly distributed. Johnston again:
The average 2005 income was 4.2 percent more, in real terms, than in 2004. But this increase was almost entirely at the top. One in 500 taxpayers makes more than $1 million, but those taxpayers reported 58 percent of the total income gain, the I.R.S. report ... showed.
And what 'industries' provide those million-dollar-a-year jobs? Well, financial services, for one - not exactly an Oregon specialty. To quote another recent Johnston article:
Top money managers earn such huge incomes that even when their compensation is mixed with the much lower pay of clerks, secretaries and others, the average pay in investment banking is 10 times that of all private sector jobs, new government data shows.
So there you go. There are a couple of Oregon-specific factors that have hurt us, but there's also a larger national context in which regular folks aren't doing that well. Some people are making out like bandits - but they're concentrated in sectors where Oregon isn't a big player.
So what do you do about it? The Conventional Wisdom is: educate the tar out of people so they can "Compete And Win In the Global Economy." And certainly there's nothing wrong with education. But as economist Alan Blinder warned last year in The American Prospect, "more education" isn't necessarily an all-purpose cure-all ... because as time goes on, we can expect to see more and more of the high-education jobs outsourced to other countries with a growing skilled workforce:
What distinguishes the jobs that cannot be offshored from the ones that can? The crucial distinction is not -- and this is the central point of this essay -- the required levels of skill and education. These attributes have been critical to labor-market success in the past, but may be less so in the future. Instead, the new critical distinction may be that some services either require personal delivery (e.g., driving a taxi and brain surgery) or are seriously degraded when delivered electronically (e.g., college teaching -- at least, I hope!), while other jobs (e.g., call centers and keyboard data entry) are not. Call the first category personal services and the second category impersonal services. With this terminology, I have three main points to make about preparing our workforce for the brave, new world of the future.
First, we need to think about, plan, and redesign our educational system with the crucial distinction between personal service jobs and impersonal service jobs in mind. Many of the impersonal service jobs will migrate offshore, but the personal service jobs will stay here.
Second, the line that divides personal services from impersonal services will move in only one direction over time, as technological progress makes it possible to deliver an ever-increasing array of services electronically.
Third, the novel distinction between personal and impersonal jobs is quite different from, and appears essentially unrelated to, the traditional distinction between jobs that do and do not require high levels of education.
For example, it is easy to offshore working in a call center, typing transcripts, writing computer code, and reading X-rays. The first two require little education; the last two require quite a lot. On the other hand, it is either impossible or very difficult to offshore janitorial services, fast-food restaurant service, college teaching, and open-heart surgery. Again, the first two occupations require little or no education, while the last two require a great deal. There seems to be little or no correlation between educational requirements (the old concern) and how offshorable_ jobs are (the new one).
If so, the implications could be startling. A generation from now, civil engineers (who must be physically present) may be in greater demand in the United States than computer engineers (who don't). Similarly, there might be more divorce lawyers (not offshorable) than tax lawyers (partly offshorable). More imaginatively, electricians might earn more than computer programmers.
So ... where does that leave us? What do we do to make life better for regular Oregonians and Americans?
I'll throw out a few ideas that I think are a good starting point for discussion:
We should take Blinder's advice. Oregon as a state, and America as a country, should at least make sure that we train enough Oregonians and Americans to fill the next generation's need for well-paying 'personal services' jobs. It would be a pity if we had to import people from India to fill those non-offshoreable jobs.
We should take steps to ensure that whatever pie we have is shared more fairly. Even if we're stuck in a world where average incomes aren't going up much, we don't have to live in a world where median incomes are going down because all the gains are going to the top. We can start to make the economy fairer through two mechanisms:
(1) Strengthen workers' rights to organize, andIf we pass the Employee Free Choice Act and restore a real right to organize, workers will be able to drive a harder bargain with corporations, as they did in the 1950's ... when you didn't see CEOs making 400 times what the average worker made. If we eliminated special tax treatment for hedge fund managers, we would have some money that we could spend hiring people - at decent wages - to, say, shore up some crumbling bridges.
(2) Make the tax system more progressive.
We should take steps to ensure that America and Oregon play as large a role as possible in creating the cool new stuff and developing the cool new ideas that everyone else will have to buy and use. It would be nice if Microsoft employed more people, but still, it's a good thing for America that Microsoft and Bill Gates are here. Now, the government can't create Microsofts out of whole cloth - but it can take steps that increase the odds that America will have and know stuff that everybody's going to want. Since we know that the world HAS to do something about global warming, renewable energy and conservation are going to be hot topics. Products that, in one way or another, save energy or produce greener energy are going to be sellable. People with expertise in those areas will be marketable, worldwide. So let's get out ahead of everyone else - and two obvious ways to get out ahead are, one, to adopt the stiffest REQUIREMENTS around, which will force the private sector to be innovative, and, two, make some direct Federal investments in R&D, so the taxpayers will own the results.
Trade policies should be designed to lift all boats. Classical economic theory says that free trade drives down prices. But even if that's true, it's not necessarily a great deal for everyone if it also drives down wages. Many mainstream economists have begun to acknowledge that globalization HAS driven down the wages of a lot of folks, and contributed to inequality. Paul Krugman recently wrote:
It's no longer safe to assert, as we could a dozen years ago, that the effects of trade on income distribution in wealthy countries are fairly minor. There's now a good case that they are quite big, and getting bigger.So I think we should examine every trade agreement from the "wages" perspective, not just the "prices" perspective.
These are my initial thoughts. Shaping our economy to meet the needs of all working Americans, while competing in a global marketplace is a big undertaking. But one we cannot afford to ignore as we face rising inequality and stagnating incomes in Oregon and across the country.
